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Getting What We Pay For: How Do Risk-Based Payments to Medicare Advantage Plans Compare with Alternative Measures of

Paul D Jacobs1, Richard Kronick2

  • 1Center for Financing, Access, and Cost Trends, Agency for Healthcare Research and Quality, Rockville, MD.

Health Services Research
|May 24, 2018
PubMed
Abstract

Insights

Medicare Advantage (MA) beneficiaries showed lower health risk than Traditional Medicare (TM) beneficiaries based on drug use, but higher risk based on diagnoses. This suggests potential overpayment to MA plans.

Area of Science:

  • Health Services Research
  • Health Economics
  • Medicare Policy

Background:

  • Medicare Advantage (MA) plans are paid based on beneficiary health risk, creating incentives for favorable selection.
  • Understanding the relative health status of MA versus Traditional Medicare (TM) beneficiaries is crucial for accurate payment.
  • Previous studies have yielded mixed results on MA beneficiary health risk.

Purpose of the Study:

  • To estimate the relative health risk of Medicare Advantage (MA) beneficiaries compared to those in Traditional Medicare (TM).
  • To assess trends in this relative health risk over time.
  • To inform Medicare payment policies.

Main Methods:

  • Utilized Medicare claims and enrollment data from 2008-2015 for beneficiaries in Part D.
  • Assigned therapeutic classes based on prescription drug utilization.
  • Regressed non-drug health spending on demographic and therapeutic class identifiers to predict relative risk.

Main Results:

  • MA beneficiaries had 6.9% lower health risk than TM beneficiaries based on prescription drug utilization in 2015.
  • Conversely, MA beneficiaries showed 6.2% higher risk based on coded diagnoses.
  • The risk gap between MA and TM beneficiaries widened from 2008 to 2015, particularly when using diagnosis data.

Conclusions:

  • Evidence suggests MA plans may receive favorable or neutral selection.
  • Discrepancies in risk estimation based on drug use versus diagnoses highlight methodological challenges.
  • Current payment structures may exceed warranted amounts if MA beneficiaries are not sicker than TM beneficiaries.
Keywords:
Medicare advantagecoding intensityrisk adjustment

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